Cullen, who worked at a Kroger in Illinois, had a vision for an entirely new kind of store and, in 1929, sat down to outline it in a letter to the company’s CEO. It would be “monstrous in size,” he wrote, offering well over a thousand products, and be located on the outskirts of town, where rents were cheaper and the company could afford a big parking lot. At a time when families spent nearly one-quarter of their disposable income on food, Cullen promised he would “lead the public out of the high-priced houses of bondage into the low prices of the house of the promised land.”
He didn’t plan to be an entirely magnanimous Moses, of course. To lure customers in, he’d advertise the items he was selling at little or no profit — such as Campbell’s Soup for 4 cents when it usually cost 7 — but then stock many more goods marked up as much as 25 percent. Customers would be so giddy about buying incredibly cheap cans of soup, they wouldn’t notice buying incredibly expensive cans of peas.
Kroger’s CEO never responded, so Cullen quit and moved his family east, where he leased a vacant warehouse in Queens, New York. There, on August 4, 1930, he opened the doors of King Kullen, which his ads called “The World’s Greatest Price Wrecker.” Everyone else later called it the world’s first supermarket. Cullen had boasted that his store would sell 10 times more than a regular Kroger, or about $600,000 a year. He ended up topping $1 million.
It didn’t take long for copycat supermarkets to sprout around the country. The first in New England arrived in 1935, when the Rabinovitz family, owners of the Economy Grocery Stores chain (later renamed Stop & Shop), took over an old factory on Memorial Drive in Cambridge. The family’s R.H. White Food Mart sold $2 million worth of groceries its first year, 45 times its regular stores.
Today, there are more than 36,000 supermarkets nationwide, and, thanks in part to their relentless price-slashing, we now spend about 12 percent of our income on food.
These days, it’s become commonplace to blame Walmart for killing off America’s small, local businesses. But that was really the supermarkets’ fault. The past century saw supermarkets “consolidating all the independent businesses — the independent butcher, the independent greengrocer — into a single shop,” says Rand. “Walmart didn’t invent the idea of creating a superstore, they just took it to another level.”
Walmart, however, is largely to blame for the crisis facing the conventional supermarket. The company now has 3,000 Supercenters, each with about a third of its average 182,000 square feet devoted to food, and Americans spend more with it than any other chain.
A few years ago, researchers affiliated with Northwestern University’s business school analyzed the sales data of a supermarket in an unidentified East Coast suburb. After a Supercenter opened nearby, the supermarket ended up losing 17 percent of its business, or about a quarter of a million dollars a month.
Walmart’s success leaves competitors with two choices, says Jundong Song, a partner at 89 Degrees, a data-driven marketing firm in Burlington. First, you can be like Market Basket and find ways to compete on low prices. Or you can create a store that is so different, so unique that customers don’t even think of Walmart when they walk in its doors.
PULLING INTO THE NORTHBOROUGH CROSSING shopping plaza, 45 minutes from Boston, it’s easy to see which route Wegmans has chosen. At 135,000 square feet, it isn’t much smaller than the average Supercenter. Yet Walmarts loom as enormous gray boxes, and this Wegmans, clad in fieldstone and topped by a shingled clock tower, comes across as a friendly (albeit super-sized) country store.
I’d arranged to meet Bill Congdon, the manager of the upstate New York-based company’s New England division. A gregarious 57-year-old, Congdon had for years overseen the 81-store chain’s highest-volume location, which was also where it tested its new products. Congdon was the natural choice to lead the company’s risky expansion into this area, which it had been eyeing for 15 years.
Before the Northborough store opened last October, “we were really worried,” Congdon says. “Nobody out here really knew what Wegmans was all about.” Yet 2,000 people were waiting in line that first morning, among them a group of Boston doctors who had gone to school in Wegmans territory and had spent the night in an RV in the parking lot. It was the highest-grossing opening in the chain’s 96-year history. (A second Massachusetts store is slated to open in Chestnut Hill in the fall of 2013, followed by more in Burlington and Westwood in 2014.) Continued...